News

Principle Agreement Reached on Two Lower Cost F-35 Contracts

Washington D.C. // July 30, 2013

The U.S. Department of Defense and Lockheed Martin reached an agreement in
principle for the next two F-35 Lightning II aircraft production contracts
(Low-Rate Initial Production (LRIP) lots 6 and 7), which is expected to include
71 stealth fighter aircraft and continue a reduction in F-35 aircraft pricing.

The contracting effort spanned six months from proposal to settlement.

A
decrease in F-35 LRIP 6-7 unit costs, coupled with negotiating lower prices on
a number of other smaller contracts, will allow the Department to purchase all
the aircraft originally planned, including those that were in jeopardy of being
cut due to sequestration budget impacts.

Cost
details will be released once both contracts are finalized; however, in
general, the unit prices for all three variants of the U.S. air vehicles in
LRIP-6 are roughly four percent lower than the previous contract. LRIP-7 air
vehicle unit prices will show an additional four percent reduction. The LRIP-7
price represents about an eight percent reduction from the LRIP-5 contract
signed in December 2012.

"These
two contracts represent a fair deal that is beneficial to the government and
Lockheed Martin," said Lt. Gen. Chris Bogdan, F-35 Program Executive
Officer. "Improving affordability is critical to the success of this
program, and by working together we were able to negotiate a lower cost F-35.
There is still work to be done, but these agreements are proof the cost arrow
is moving in the right direction. We will continue to work with industry
to identify areas for savings in future production contracts."

The
new contracts will also include the first F-35s for Australia, Italy, Norway,
and the fourth F-35 for the United Kingdom. In addition to procuring the air
vehicles, these contracts also fund manufacturing-support equipment and
ancillary mission equipment.

Deliveries
of 36 U.S. and partner nation aircraft in LRIP-6 will begin by mid-2014 and
deliveries of 35 U.S. and partner nation aircraft in LRIP-7 will begin by
mid-2015.

“At
the start of these negotiations, the F-35 Joint Program Office and our F-35
team jointly committed to conduct LRIP-6 and -7 negotiations in an efficient
manner that leveraged all we achieved from the LRIP-5 contract,” said Lorraine
Martin, Lockheed Martin F-35 Vice President and General Manager. “Today’s
agreement reflects our collective JPO/LM delivery on that commitment. We know
how critical aircraft production is to meeting our services’ Initial
Operational Capability dates, beginning with the Marine Corps in 2015, and
we’re committed to making that happen.”

The
LRIP-6 and -7 aircraft will join the 95 F-35s contracted under LRIPs 1-5. To
date, 67 F-35s (including test aircraft) have been delivered from Lockheed
Martin's production facility in Fort Worth, Texas. The U.S. and eight partner
nations plan to acquire more than 3,100 F-35 fighters. Israel and Japan have
also announced plans to purchase the jet under Foreign Military Sales
agreements.

The
agreement in principle reached between the Government and Lockheed Martin are
for air vehicles and do not include the propulsion systems. The LRIP-6
engine contract is currently being negotiated between the Government and Pratt
& Whitney.